Apple has $100 billion of cash and a lot of ways to spend
it, according to Forbes. Add more retail stores? Check. Set up more server farms to support its
iCloud service? Check. Build a second campus in Cupertino, Calif. to house its
burgeoning staff? Check. Acquire companies and expand R&D? Check. Pay
dividends and do stock repurchases? Check, check.
How about buying up its own supply chain? A lot of high-tech
manufacturers on The Global 2000 dream about controlling what they pay for
components and gaining the assurance that crucial parts will flow as needed.
Apple is one of very few firms with the financial wherewithal to make that come
true, specifically by buying production equipment to outfit new and existing
factories in Asia that other people will run. Apple is already deploying its
cash toward this very goal, say people who follow the company closely. It’s a
strategy that will likely continue the disruption in the consumer electronics
field that Apple has led to date.
The iPhone maker has $64 billion or so of its cash sitting
overseas, taxed at an attractively low 5% rate but also earning little to no
interest. Any cash Apple chooses to bring back to the States would get hit at
the 35% U.S. tax rate, not a pleasant prospect. Spending that money on
expanding offshore production is far more compelling. Apple keeps the
depreciation expense while keeping production costs down. It also means the
company will be ready to continue pumping up the volume to feed the seemingly
insatiable appetite for iPhones and iPads in the near term and rumored new
category-busting products like an interactive TV in the long term…..
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